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A $1,000 par value 12-year bond with a 14 percent coupon rate recently sold for $925....

A $1,000 par value 12-year bond with a 14 percent coupon rate recently sold for $925. What is the yield to maturity? Assume semiannual payments and submit your answer as a percentage rounded to two decimal places.

To answer the question:

(1) Describe and interpret the assumptions related to the problem.

(2) Apply the appropriate mathematical model to solve the problem.

(3) Calculate the correct solution to the problem.

Solutions

Expert Solution

Calculating Yield to Maturity,

Using TVM Calculation,

I = [FV = 1,000, PMT = 70, N = 24, PV = -925]

I = 15.39%

Yield to maturity= 15.39%

jeff jeffy answered 2 years ago
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